Document of The World Bank FOR OFFICIAL USE ONLY Report No. 104985-DJ INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION MULTILATERAL INVESTMENT GUARANTEE AGENCY PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF DJIBOUTI FOR THE PERIOD FY14-FY17 May 3, 2016 Djibouti Country Management Unit Middle East and North Africa Region International Development Association Strategy Unit Africa Region International Finance Corporation Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
44
Embed
INTERNATIONAL DEVELOPMENT ASSOCIATION ......pillar, thanks to a robust portfolio of well-performing projects. Results under the second pillar have been mixed, with two ongoing projects
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 104985-DJ
INTERNATIONAL DEVELOPMENT ASSOCIATION
INTERNATIONAL FINANCE CORPORATION
MULTILATERAL INVESTMENT GUARANTEE AGENCY
PERFORMANCE AND LEARNING REVIEW
OF THE COUNTRY PARTNERSHIP STRATEGY
FOR
THE REPUBLIC OF DJIBOUTI
FOR THE PERIOD FY14-FY17
May 3, 2016
Djibouti Country Management Unit
Middle East and North Africa Region
International Development Association
Strategy Unit
Africa Region
International Finance Corporation
Multilateral Investment Guarantee Agency
This document has a restricted distribution and may be used by recipients only in the performance of their
official duties. Its contents may not otherwise be disclosed without World Bank Group authorization.
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Last Country Partnership Strategy (Report No. 83874-DJ): March 13, 2014
FISCAL YEAR: January 1 to December 31
CURRENCY EQUIVALENTS: Currency Unit = Djibouti Francs
ABBREVIATIONS AND ACRONYMS AF Additional Financing
AFD Agence Française de Développement
AfDB African Development Bank
ASA Advisory Services and Analytics
CARAD Comprehensive Approach to Risk Assessment in Djibouti
CPS Country Partnership Strategy
DISED Directorate of Statistics and Demographic Studies
DRDIP Development Response to Displacement Impacts in the Horn of Africa Project
EDAM Enquête Djiboutienne Auprès des Ménages pour les Indicateurs Sociaux (Djibouti Social
Indicators Household Survey)
ESMAP Energy Sector Management Assistance Program
ESW Economic and Sector Work
EU European Union
FAO Food and Agriculture Organization
FIRST Financial Sector Reform and Strengthening Initiative
GEF Global Environment Facility
IDA International Development Association
IFAD International Food and Agricultural Development
IFC International Finance Corporation
IMF International Monetary Fund
JSDF Japan Social Development Fund
MENA Middle East and North Africa
MIGA Multilateral Investment Guarantee Agency
PIU Project Implementation Unit
PLR Performance and Learning Review
PPP Purchasing Power Parity or Public-Private Partnership
PRODERMO Projet de Développement Communautaire Rural et de Mobilisation des Eaux (Rural
Community Development and Water Mobilization Project)
RBF Results-Based Financing
SMEs Small and Medium Enterprises
SOE State-Owned Enterprise
SORT Systematic Operations Risk-Rating Tool
SSNP Social Safety Net Project
TA Technical Assistance
UMP Union pour la Majorité Présidentielle
UNHCR United Nations High Commission for Refugees
USN Union pour le Salut National
WBG World Bank Group
IDA IFC MIGA
Vice President: Director: Task Team Leader:
Hafez M. H. Ghanem
Asad Alam Homa-Zahra Fotouhi
Snezana Stoiljkovic
Cheikh O. Seydi Adamou Labara
Keiko Honda
Dan Biller (Acting) Persephone Economou
TABLE OF CONTENTS
I. INTRODUCTION ................................................................................................................................... 1
II. COUNTRY CONTEXT AND RECENT CHANGES ......................................................................... 2 A. POLITICAL AND SECURITY DEVELOPMENTS ......................................................................................... 2 B. RECENT ECONOMIC DEVELOPMENTS .................................................................................................... 3 C. POVERTY REDUCTION AND SHARED PROSPERITY ................................................................................. 4
III. SUMMARY OF PROGRAM IMPLEMENTATION ....................................................................... 6 A. PROGRESS TOWARD CPS OBJECTIVES .................................................................................................. 6 B. PORTFOLIO PERFORMANCE ................................................................................................................... 7 C. EVOLUTION OF PARTNERSHIPS AND LEVERAGING ................................................................................ 8
IV. EMERGING LESSONS ...................................................................................................................... 9
V. ADJUSTMENTS TO THE COUNTRY PARTNERSHIP STRATEGY ....................................... 10
VI. RISKS TO THE CPS PROGRAM ................................................................................................... 17
ANNEX 3: PROGRESS TOWARD ORIGINAL CPS RESULTS ............................................................ 27
ANNEX 4: DJIBOUTI AND THE MDGs ................................................................................................. 33
ANNEX 5: SELECTED RESULTS OF WORLD BANK GROUP INTERVENTIONS IN DJIBOUTI .. 34
ANNEX 6: FINDINGS OF THE COUNTRY OPINION SURVEY ......................................................... 36
ANNEX 7A: DJIBOUTI IDA PORTFOLIO AS OF JANUARY 2016 ..................................................... 37
ANNEX 7B: DJIBOUTI PORTFOLIO OF RECIPIENT- AND BANK-EXECUTED TRUST FUNDS AS
OF JANUARY 2016 ................................................................................................................................... 38
1
I. INTRODUCTION
1. The first joint IDA-IFC-MIGA Country Partnership Strategy (CPS) for FY14-17 for Djibouti
was discussed by the Board of Directors in March 2014. The CPS is anchored in the Government of
Djibouti’s Vision 2035, a long-term development plan that focuses on economic integration, governance,
and human development, and continues to guide Djibouti’s development focus today. The CPS reflects the
understanding in Vision 2035 that Djibouti’s capital-intensive, public sector-dominated growth model is no
longer sustainable and that new approaches are needed to address vulnerabilities and accelerate job creation
for poverty reduction and shared prosperity. The CPS rests on two pillars—reducing vulnerability and
strengthening the business environment—and focuses on institutional strengthening and gender as cross-
cutting themes. The CPS was designed around an indicative IDA envelope of US$25 million.
2. This Performance and Learning Review (PLR) assesses progress toward achieving CPS
outcomes, draws lessons from implementation, and provides an updated results framework for the
remainder of the CPS period. Good progress has been made toward achieving CPS outcomes in the first
pillar, thanks to a robust portfolio of well-performing projects. Results under the second pillar have been
mixed, with two ongoing projects still in the early stages of implementation and one planned project on
telecommunications reform failing to materialize due to low government commitment.
3. It is proposed that the CPS period be extended by one year, through FY18, to allow sufficient
time to incorporate upcoming household-level poverty statistics into country plans and programs.
Djibouti’s next household income and expenditure survey (Enquête Djiboutienne Auprès des Ménages pour
les Indicateurs Sociaux, EDAM) will be implemented in 2017. The data collected through this survey would
provide a firmer foundation for the preparation of a Systematic Country Diagnostic (SCD) in FY18—which
will provide the analytical underpinnings of the next World Bank Group (WBG) Country Partnership
Framework.
4. This PLR proposes adjustments to the CPS to address Djibouti’s evolving needs and align
more closely with the WBG’s new strategy for the Middle East and North Africa (MENA) region.1
Changes to the CPS are intended to strengthen the WBG’s response to emerging development challenges
such as growing refugee and youth populations and enduring service delivery deficits. These challenges
align with the key focus areas in the MENA strategy, particularly on renewing the social contract and
boosting resilience to refugee and migration shocks. Under the first pillar of the CPS on reducing
vulnerability, a new regional operation has been prepared to help improve access to social services, expand
economic opportunities, and enhance environmental sustainability in communities hosting refugees in the
Horn of Africa. The second pillar of the CPS will be revised from “strengthening the business environment”
to “strengthening public and private sector capacity for service delivery,” with a view to addressing both
public and private service delivery constraints more broadly. These changes reflect feedback provided
during stakeholder consultations. The PLR has an indicative envelope of US$31 million following the IDA-
17 replenishment. In addition, it draws on about US$18 million in regional IDA resources. The program
for FY18 will depend on Djibouti’s IDA-18 allocation and remains flexible.
1 World Bank. 2015. Economic and Social Inclusion for Peace and Stability in the Middle East and North Africa: A New Strategy
for the World Bank Group. Washington DC: World Bank.
2
II. COUNTRY CONTEXT AND RECENT CHANGES
A. Political and Security Developments
5. Djibouti has remained relatively peaceful in recent years, unlike other countries in this
important yet unstable region, but it continues to face security challenges. On May 24, 2014, an Al-
Shabaab attack on a local restaurant frequented by foreign nationals killed a Turkish national and injured
many foreigners and locals, underscoring the country’s security challenges. Many operations against
regional terrorist groups in Somalia or Yemen are planned and carried out from foreign military bases
hosted by Djibouti, making the country a potential target of terrorist groups.
6. Djibouti is negatively affected by regional instability. In mid-2014, according to the United
Nations High Commission for Refugees (UNHCR), Djibouti was hosting over 20,000 refugees and asylum
seekers from Somalia, Ethiopia, and Eritrea, mainly in two camps in the south of the country (Ali-Addeh
and Hol Hol). The protracted presence of refugees has exacerbated the effects of continuous droughts on
host communities, putting enormous pressure on already-stretched social services, infrastructure, natural
resources, and economic opportunities.
7. The war in Yemen has intensified refugee pressures in Djibouti. Only 28 kilometers separate
Djibouti’s shores from Yemen and, since the beginning of the conflict in Yemen in 2015, an estimated
30,600 people of mixed nationalities have arrived in Djibouti.2 Third-country nationals were evacuated to
their home countries by their respective embassies. Of the 6,179 remaining refugees registered, 2,829 are
sheltered in the new Markazi refugee camp in the north and 3,350 are living in the town of Obock and in
the capital, Djibouti-Ville, as of September 2015.
8. Legislative elections were held in February 2013 and, according to published results, the
opposition won 10 out of 65 seats. The opposition contested these results, however, and refused to
participate in parliament. A framework agreement was finally signed in December 2014 between the
coalition in power, united under the umbrella Union pour la Majorité Présidentielle (UMP), and the
opposition, united under the umbrella Union pour le Salut National (USN), which brought opposition
parliamentarians back to the National Assembly in January 2015. This agreement created a two-party
parliament for the first time since the country gained independence in 1977.
9. Presidential elections took place on April 8, 2016. On March 12, 2016, the Constitutional Council
approved the applications of six presidential candidates, including President Guelleh (under the UMP ruling
coalition), two candidates running under the banner of the USN opposition coalition, and three independent
candidates. According to results announced by the Ministry of the Interior, President Guelleh won the
presidential elections with 86.7 percent of the votes. The opposition coalition (USN) candidate, Omar Elmi
Khaireh, came second with 7.32 percent of the votes. Overall, calm prevailed in the country during the
elections.
2 UNHCR, May 2015.
3
B. Recent Economic Developments
10. The private and public investment boom in port-related capital-intensive activities continues
to spur growth in Djibouti. Although national accounts data are limited in Djibouti,3 it is estimated that
real GDP grew by about 6.5 percent in 2015–16, up from 6 percent in 2014 and 5 percent in 2013, and is
projected to reach 7 percent in 2017–19. This is driven in large part by high aggregate investment, estimated
at about 57 percent of GDP, on average, in 2015–2016. FDI inflows are expected to be roughly 8.6 percent
of GDP over the same period. Despite the strong pace of growth, inflation is estimated to have been
contained at about 3 percent in 2015 and is projected to reach an average of 3.5 percent over 2016–18,
thanks in part to the currency board system. Weaknesses in the system of national accounts preclude the
analysis needed to understand the quality of growth, to assess the fiscal impact of investment, or to tackle
the serious debt sustainability concerns they raise.
11. Recourse to publicly and externally financed investments is reflected in growing twin deficits.
The fiscal deficit grew to 16.5 percent of GDP in 2015 from 12.2 percent in 2014, but is expected to narrow
to an estimated 11.4 percent in 2016 with the softening of capital expenditures. Similarly, the external
deficit soared to an estimated 31 percent of GDP in 2015 from 25.6 percent in 2014, but is expected to
shrink to 14 percent in the medium term (2016–19) as imports of capital goods slow. Foreign reserves
remain strong at an estimated US$350 million in 2015 (covering 3.6 months of imports and 109 percent of
the currency board) and are projected to rise to US$399 million in 2016 (covering 4.1 months of imports
and 105 percent of the currency board). However, the commercial bank loan portfolio has deteriorated and
nonperforming loans are on the rise, topping 22 percent in June 2015.
12. Fiscal and external debt sustainability pressures are intensifying with the approaching
completion of disbursements from two large nonconcessional loans contracted in 2013. Total public
and publicly guaranteed debt is projected to peak at 79.6 percent of GDP in 2017—a significant increase
from 52.5 percent in 2014–15—and this poses risks to the country’s debt sustainability. Moreover, the
proposed tax exemption for many activities that support growth could lower fiscal revenues, thus reducing
domestic revenues as a percentage of GDP. Financing of the fiscal deficit relies mainly on external sources
(estimated at about 87 percent of the fiscal budget deficit in 2015).
13. Macroeconomic risks remain high. Growth and macroeconomic stability remain subject to
substantial risks such as delays in construction, inefficient management of new infrastructure, adverse
economic events in countries on which Djibouti depends economically, regional security developments,
and domestic social and political instability. In addition, the commercial dispute with DP World over a port
concession could lower investor confidence. Further degradation in the fiscal and debt situation and delays
in the agreement on a new Extended Credit Facility program with the International Monetary Fund (IMF),
resulting from the contracting of two nonconcessional loans, could affect the quality of macroeconomic
management and exacerbate risks to growth and stability. Already, aggregate investment is projected to
drop from 60.1 percent of GDP in 2015 to 33.4 percent by 2017 as ongoing investment projects wind down.
3 Djibouti does not independently produce GDP figures on a regular basis. These are generally estimated during IMF Article IV
missions, held once or twice per year. Data on sectoral contributions to GDP are nonexistent.
4
C. Poverty Reduction and Shared Prosperity
14. Djibouti has enjoyed high rates of economic growth in the past decade, but its capital-
intensive, public-sector-led approach to growth has not alleviated high levels of poverty or
unemployment. Government data from 2013,4 which were not available at the time the CPS was published,
indicate that more than one-fifth of the population lives in extreme poverty and cannot cover basic food
needs. This rate is higher in rural regions, at an estimated 44 percent. When poverty calculations take into
account both food and nonfood necessities, the associated poverty rates are estimated to be 40.7 percent
nationally, and 62.5 percent for rural areas. The Ali Sabieh and Obock regions show the highest levels of
poverty, at 77.8 and 79.7 percent, respectively. These results reflect the meager progress achieved in social
inclusion and the lack of mitigation measures in response to regional disparities.
15. High rates of poverty despite robust growth reflect the dampening effect of high inequality
in household consumption. In 2013, a government study estimated the Gini index at 0.44, a slight increase
from 0.40 in 2002. Inequality is higher in Djibouti than in lower-middle-income countries (0.414 on average
for 2005–12).5 Other work using 2012 data highlighted wide differences in standards of living across
Djibouti, where households in the top 20 percent of the population spend on average more than eight times
the amount consumed by households in the bottom 40 percent. Owing to the scarcity of household-level
poverty data, it is not yet possible to track the incomes of those in the bottom 40 percent and thus to
understand Djibouti’s progress in promoting shared prosperity. The Bank’s technical assistance planned in
FY17 will start to help addressing some of the data gaps.
16. The structure of growth—given that it is driven by capital intensity, foreign borrowing, and
rents from the port and from foreign military bases—has not helped generate enough jobs for
Djiboutians. Unemployment is estimated at 48 percent nationwide, and estimates suggest that over 70
percent of young people under the age of 30 are unemployed. Yet the work made available through port-
related activities requires higher-skilled labor in smaller amounts than would be needed to absorb the
abundance of low-skilled laborers in Djibouti. As pointed out in the CPS, the pace of job creation will need
to double in order to even begin to tackle unemployment, and demographic pressures will only intensify as
a young and increasingly well-educated population enters the labor market. The country will need to address
the problem of inadequacy between the demand and the supply for skilled labor. The Bank is working with
the Ministry of Education and Vocational Training to reinforce their capacity, enhance their communication
with the private sector, and better link training with market demands.
17. The emerging economic picture calls for renewing the social contract between the state and
its citizens. It points to the need to fundamentally rethink the role of the state and to shift from capital-
intensive to labor-intensive, job-creating development; from a rent-seeking economic system to one of
competitive gains; from the provision of low-quality social services to those that create meaningful human
capital and skills for higher productivity; and from limited voice and accountability to active involvement
of citizens in the development process. Such a shift would require inclusive development that unshackles
the constraints to private-sector-led job creation, especially for low-skilled workers, and provides
4 These estimates are based on data from the Enquête Djiboutienne Auprès des Ménages pour les Indicateurs Sociaux–Budget et
Consommation (EDAM-BC) 2013, and developed by the Directorate of Statistics and Demographic Studies and the African
Development Bank. The poverty line is defined at 77,843 Djibouti francs per person per year, or about US$1.97 per day in terms
of 2011 purchasing power parity (PPP). This per-capita figure was obtained using an adjustment factor, as Djibouti’s official
poverty line is based on an adult equivalent measure. 5 The Gini coefficient measures the dispersion of wealth, with 0 percent indicating perfect equality and 1 indicating maximum
inequality.
5
opportunities for all. Improved governance through the creation of inclusive institutions, promotion of
voice and accountability, and development of efficiency and transparency in public sector institutions will
be critical to support inclusive development.
18. Achieving a better understanding of the nature of poverty and the quality of growth in
Djibouti would require better data. The country’s poverty monitoring system could be improved through
critical amendments to the household survey instrument and protocols, including efforts to incorporate
vulnerable population groups that are often excluded from existing household surveys, improved
measurement of expenditures on and ownership of certain goods, and better methods for addressing
seasonality and long recall periods.
19. The combination of high poverty, inequality, and unemployment in a context of high growth,
together with the influx of refugees escaping regional conflicts, exacerbates Djibouti’s vulnerability
and impairs human development. Inequalities in social outcomes are highly pronounced, particularly in
rural areas and among poor people. While overall female literacy is 39.5 percent, the literacy rate for women
in rural areas is only 9 percent. Only 40 percent of primary school-aged girls and 24 percent of secondary
school-aged girls go to school in rural areas, and primary school completion rates are lower for poor girls
than nonpoor girls. Djibouti has the highest maternal mortality ratio in the region, owing to a lack of access
to emergency obstetric services and a high fertility rate—both problems concentrated in rural areas and
among poor people. Over 30 percent of Djiboutian children are stunted, with irreversible, long-term, and
multigenerational health and economic consequences. It is estimated that Djibouti failed to meet its
Millennium Development Goals by 2015, with the possible exception of ensuring environmental
sustainability by improving access to improved water sources (Annex 4). In light of current service delivery
deficits, it will be a challenge for Djibouti to reach the new Sustainable Development Goals (SDGs) for
2030.
20. Private sector development continues to be constrained by rigid and cumbersome procedures
and high costs for key factors of production. Doing Business 2016 ranks Djibouti 155th among 189
countries on overall ease of doing business (up from 171st in 2013). Costs for inputs such as energy, labor,
telecommunications, and land remain prohibitively high. Initial regulatory measures implemented in 2013
to improve business registration have slowed considerably. Despite constituting the majority of enterprises
in Djibouti, small and medium enterprises (SMEs) continue to struggle to access financing due to high
collateral requirements, high interest rates, and terms that are not suited to their needs. According to the
third EDAM survey (2012), structured private sector contributions to job creation amount to about 20
percent, compared to 39 percent from the informal sector and 41 percent from state employment. The high
cost of business registration and the complexity of the country’s fiscal system impede the movement of
businesses from the informal sector to the formal sector, and by extension job creation.
21. Continued weaknesses in most areas of public sector management thwart the types of
governance improvements needed to bolster private sector development and job creation. According
to Country Policy and Institutional Assessment indicators, Djibouti ranks below the average for IDA
countries on property rights and rule-based governance; quality of budget and financial management;
quality of public administration; and transparency, accountability, and corruption in the public sector.
Accountability is weak throughout the service delivery chain and across sectors, and citizens have little
voice with respect to service delivery performance. Corruption remains problematic, with Djibouti ranking
99th out of 167 countries on Transparency International’s 2015 Corruption Perceptions Index. The Anti-
Corruption Commission established in December 2015 lacks capacity and is not yet operational. In the area
of public financial management, many recommendations from a Country Financial Accountability
6
Assessment in 2003 and a Public Expenditure and Financial Accountability review in 2011 have yet to be
implemented, and improvements are needed in line ministry budget execution, cash planning, coordination
among audit and control bodies, and accounting and reporting. In 2011, the government embarked on an
ambitious civil service and public administration reform program to address persistent weaknesses such as
overstaffing and lack of attention to merit and performance, but reform implementation has been slow.
III. SUMMARY OF PROGRAM IMPLEMENTATION
A. Progress toward CPS Objectives
22. Performance of the CPS program has been mixed, with better progress in achieving outcomes
under the first pillar than those under the second pillar. Projects proposed under the CPS have all been
delivered with the exception of the telecommunications project. Of 23 outcome indicators included in the
original results framework, nine have been achieved and five more are on track for completion by the end
of the CPS period. Eight of seventeen CPS outcomes outlined under the first pillar have been achieved,
whereas only one of six targets under the second pillar has been reached. The outcome on
telecommunications reform is being dropped, as the relevant project is no longer going forward, and three
indicators that have not yet been achieved are being replaced with those that align more closely with current
project interventions. The WBG will continue to look for opportunities to support the cross-cutting themes
of institutional strengthening and gender during the remainder of the CPS period, including in new
interventions. Following is a brief assessment of the performance of the CPS program, by pillar; more
details can be found in Annex 3.
23. Pillar 1: Reducing Vulnerability. The good progress made in achieving results under this pillar
results from a robust portfolio, including projects on social safety nets, rural community development and
water mobilization, health, and urban poverty reduction—all of which have progressed well over the CPS
period.
Improved institutional capacity to reach the poorest and most vulnerable: Most targets have been
achieved or exceeded. A poverty and gender diagnostic study has been carried out. Efforts to
strengthen poverty and gender statistics are on track for achievement by the end of the CPS period.
The WBG is working closely with the Government of Djibouti’s Directorate of Statistics and
Demographic Studies (DISED) and with the African Development Bank (AfDB) to develop an
implementation strategy for the EDAM 2017, with a view to producing more reliable indicators—
at the national level and disaggregated by region, gender, vulnerability status, and other
considerations—and track them more consistently so that they can inform policy making and the
development debate.
Strengthened education system management: The production of annual education statistical reports
has been achieved.
Improved utilization of good-quality maternal and child health care services and communicable
disease control programs: The share of HIV-positive pregnant women receiving antiretroviral
therapy has increased, exceeding the CPS target. The target on skilled birth attendance has not been
achieved and is being adjusted to include only rural areas, thus ensuring consistency with plans and
targets under ongoing WBG interventions. The target on the share of children immunized will be
adjusted to align with current project targets.
Increased access to basic infrastructure in disadvantaged rural and urban areas: Targets on
increasing secure access to drinking water, improving the share of female subproject beneficiaries
in Quartier 7, and boosting the number of income-generating activities targeting women have been
7
achieved. The target on the share of funded subprojects completed by women’s organizations is on
track to be achieved by the end of the CPS period. This activity will be financed through a project
on urban poverty reduction. Targets on road improvements and community development
beneficiaries in Quartier 7 are being adjusted to ensure consistency with WBG interventions.
Improved assessment of natural disaster risk and vulnerability: Targets in this area have not been
achieved. In 2013, the Comprehensive Approach to Risk Assessment in Djibouti (CARAD)
program was launched to help strengthen institutional capacity by developing an early warning
system, updating emergency plans and protocols, establishing a network of five hydrometerological
stations, and assessing Djibouti-Ville’s vulnerability to earthquakes and flash floods. In response,
the WBG program developed decision-making tools to reduce housing vulnerability, including
housing sector diagnostics, a national strategy on housing, self-construction guides, and a study on
priorities and implementation challenges. CARAD is awaiting approval by the council of ministers
and is expected to be operational during the CPS period.
24. Pillar 2: Strengthening the Business Environment. Results under this pillar have been mixed,
owing largely to a slow start on two new projects and the failure of a third planned project to materialize.
Improved access to affordable electricity: The target on increasing household access to electricity
was achieved, but the remaining three outcomes have seen delays owing to a slow start in project
implementation. Implementation of the Geothermal Power Generation Project is beginning to pick
up, and the remaining targets are expected to be achieved by the end of the CPS period.
Telecommunications reform: The project foreseen in the CPS did not materialize owing to a lack
of government commitment; this outcome is therefore being dropped.
Improved investment climate in selected areas: Targets in this area are on track to be achieved.
Progress was registered through continued work with the Djibouti’s construction permit agency, as
measured by the latest iteration of the joint World Bank-IFC Doing Business report.
25. Following the CPS focus on gender as a cross-cutting theme, gender equity is addressed in
the design and implementation of operations in the social protection, education, urban and rural
development, and health sectors. Project results frameworks include both qualitative and quantitative
outcomes ranging from improving women’s access to water and better health services to strengthening their
capacity and means to participate in income-generating activities.
B. Portfolio Performance
26. As of March 2016, the active portfolio for Djibouti comprises seven IDA projects, for a total
commitment of US$45 million and with an undisbursed balance of about US$24 million. WBG teams
have continued to leverage IDA resources through trust funds, both recipient- and Bank-executed, with a
net commitment value of about US$24 million as of March 2016. Trust-funded activities are fully aligned
with, and complementary to, the IDA-funded portfolio. IFC has no active investment portfolio in Djibouti.
MIGA has supported one project in Djibouti thus far and continues to seek opportunities to support private
sector investment through political risk guarantees.
27. The WBG’s portfolio in Djibouti is young and has suffered initial delays, but indications are
that the pace of implementation will pick up. The projects included in the current portfolio are relatively
new. Implementation was slowed initially by the need to engage with new counterparts, but momentum is
building. There are three problem projects in the portfolio. The multidonor Geothermal Power Generation
8
Project is showing improved performance, but is still in problem status.6 The Bank’s two education projects
need particular attention. They suffer from slow implementation, with a disbursement rate of 45 percent
after three-and-a-half years for the Strengthening Institutional Capacity and Management of the Education
System Project (US$6 million grant) and 13 percent after two years for the Access to Quality Education
Project (US$3.8 million grant financed by the Global Partnership for Education). Low capacity and high
turnover among key ministry personnel constitute the main impediments to successful implementation of
these projects. The WBG continues to supervise these projects closely to ensure proactivity. Across the
portfolio, the WBG will put additional emphasis on quality at entry of new projects and take an assertive
approach to restructuring or cancelling projects that do not move forward.
28. The WBG, in partnership with the authorities, is implementing a strategy to improve
portfolio performance. Several implementation challenges have been identified in biannual portfolio
workshops, including frequent government reshuffles, difficult coordination among government
institutions, low institutional capacity for procurement and planning, high turnover of project teams in
sectoral ministries, and cumbersome bureaucratic procedures. Nevertheless, important results have been
achieved in a number of ongoing and recently closed projects (Annex 5). Remedial measures have included
fiduciary support in the form of procurement, financial management, and safeguards training to local
companies through the Chamber of Commerce. These courses strengthen the private sector’s understanding
of effective procurement procedures and international best practices to help ensure that bids or audits
submitted by local companies are adequate, complete, and in line with fiduciary requirements. In addition
to reference tools such as public procurement guidelines, trainers have been trained to strengthen the
capacity of stakeholders in various institutions. Hands-on and case-study-based training opportunities are
provided to project implementation units (PIUs) through monthly procurement seminars. More frequent
implementation support missions and management support are helping to strengthen the focus on
implementation.
C. Evolution of Partnerships and Leveraging
29. The WBG has expanded its technical and financial cooperation with Djibouti’s key
development partners during the CPS period. In particular, the WBG is working closely with Agence
Française de Développement (AFD) to cofinance the establishment of a legal and regulatory framework
for public-private partnerships (PPPs); with the UNHCR, the European Union (EU), and the Food and
Agriculture Organization (FAO) on responses to displacement and migration; with the International Fund
for Agricultural Development (IFAD) on rural development and water mobilization; and with the AfDB on
energy. The WBG also continues to work closely with the government of Japan on the implementation of
Japan Social Development Fund (JSDF) grants.
30. The WBG has expanded its internal collaboration. The proposed new operation on
Development Response to Displacement Impacts in the Horn of Africa (DRDIP) covers Djibouti, Ethiopia,
and Uganda, and is the first regional IDA project addressing the spillover impacts of forced displacement
6 Seven donors contribute to the financing of the geothermal project. The AfDB financed the first activities, followed by AFD and
then by IDA, the Global Environment Facility (GEF), and the Energy Sector Management Assistance Program (ESMAP). The
project suffered initial delays in implementation as a result of changes in the AfDB task team and slow procurement and
disbursement approvals owing to an underperforming PIU. It was thus flagged as a problem project. Over the last six months,
however, significant positive changes have occurred at the level of the PIU, which is working well and intensively with the
geothermal consulting company to issue a request for proposals for drilling services. The pace of project implementation is now
expected to accelerate.
9
at the regional level. It is expected that this joint operation between the MENA and Africa regions will
catalyze future collaboration on other critical cross-regional issues and operations.
31. Collaboration across the WBG’s Global Practices has increased during CPS implementation.
The Global Practices on Health, Nutrition, and Population and on Social Protection and Labor are
collaborating through the Improving Health Sector Performance Project and the Social Safety Net Project
(SSNP) to incentivize appropriate utilization of maternal and child health services offered at health facilities
and to enhance the sustainability of community-based prevention activities. In addition, the Social
Protection and Agriculture teams are collaborating through the SSNP and the Rural Community
Development and Water Mobilization Project (PRODERMO) to ensure that community-based prevention
activities addressing maternal and child health and nutrition will be extended in rural areas. The strong
community structures put in place through PRODERMO will be leveraged to train community leaders and
set up prevention activities for the SSNP. The Global Practices on Finance and Markets, Trade and
Competitiveness, and Governance have worked together under the umbrella of the Governance for Private
Sector Development Project, in consultation with IFC, to support the Djiboutian authorities in improving
access to justice, and in assessing SME finance constraints and developing a partial credit guarantee
instrument. The close collaboration among Global Practices is reflected in the country team’s plan to take
three new, complementary projects to the WBG’s Board of Executive Directors in conjunction with this
PLR (paragraph 46).
IV. EMERGING LESSONS
32. Djibouti’s weak governance framework and the poor performance of its public
administration hamper successful project implementation, as well as overall economic and social
development. Despite the government’s announcement in January 2015 of major reform efforts to address
key development challenges in the public administration system, only some of the intended reforms have
commenced. The termination of negotiations over planned investment lending to reform the
telecommunications sector highlights the difficulties involved in changing the status quo. More attention
needs to be paid to governance shortcomings and bottlenecks, and to supporting (sector) governance
reforms as a means to improve overall governance performance in Djibouti.
33. Design of the WBG portfolio needs to take into account the political economy of Djibouti,
recognizing the drivers of fragility and building on the factors that keep Djiboutian society stable and
resilient. An informal, internal social and political assessment found that fragility in the country is driven
by an unfinished political transition dominated by elite patronage; by high inequality and unemployment,
particularly among young people; and by a lack of justice and redress mechanisms. Nonetheless, Djiboutian
society remains relatively stable within a troubled region, drawing strength from strong community
solidarity and social cohesion, national pride, and the country’s important strategic role in the Horn of
Africa. Given this careful balance, the WBG’s portfolio should take care to reinforce participatory
approaches and systems, integrate meaningful sociopolitical analysis into project design, promote trust
between the government and the population, and focus interventions in critical areas such as basic service
delivery, governance, rural development, and employment generation. The PLR draws from these lessons
to refine the CPS and going into the next Country Partnership Framework with Djibouti.
34. Stakeholder consultations support the PLR’s proposed alignment with the new MENA
strategy and the focus on public and private sector capacity for service delivery. A South-South High-
Level Development Exchange, organized in June 2014, underscored the importance of reducing electricity
and telecommunications costs and strengthening governance and the business climate to improve the private
10
sector’s role as an engine of growth. Results of a country opinion survey conducted in early 2015 pointed
to a shift in priorities since the last such survey in 2012 (Annex 6), from poverty reduction and education
to public sector governance and reform, health, social protection, and jobs. Survey ratings of the WBG’s
performance improved substantially, although there continued to be room for improvement in the speed of
preparation, complexity, and timeliness of WBG knowledge products. Consultations conducted in
November 2015, in preparation for the PLR, demonstrated broad agreement among high-level government
officials and representatives of the private sector, civil society, and donor organizations on the relevance of
the new MENA strategy to the development context in Djibouti. Stakeholders noted good progress toward
CPS outcomes and discussed lessons learned, including the need to focus on areas where the government
is committed to reform, the need for clarity on PIU staffing at the outset, the need for simpler program
design, and the need for flexibility to adapt to changing circumstances. While the government agreed that
focusing on social sectors would help the country absorb short-term shocks, it was suggested that progress
in the productive sectors would be needed to create jobs to reduce poverty and ensure equitable and
sustainable development in Djibouti.
35. Djibouti remains a challenging implementation environment and requires simpler designs,
closer and more regular implementation support from the Bank, and increased support to PIUs on
WBG processes and procedures. The country team is addressing these challenges by ensuring that PIUs
are staffed adequately and by holding quarterly (rather than biannual) implementation support missions and
monthly audio and video conferences. In addition, three-day workshops on procurement, disbursement, and
financial management have been held twice per year with all PIUs to clarify WBG procedures. The WBG’s
new procurement policy can help address these challenges by allowing for a more strategic approach to
procurement. By reducing the number of contracts subject to prior review, the new policy could free up
resources to provide clients with hands-on technical and capacity-building support.
36. Identification of qualified local project managers is critical to enable more efficient program
implementation and achievement of results. As an example, the geothermal project stalled for almost
two years before a decision was made at the highest levels to change the project coordinator. Since then,
project implementation has accelerated and notable progress has been made in only six months. Recruitment
of a project coordinator through a competitive bidding process is crucial in properly staffing the PIU and
ensuring timely implementation of activities through dedicated, well-qualified personnel.
37. A more realistic results matrix is needed to reflect the challenging implementation
environment. Despite extraordinary efforts by the task teams to conduct regular monitoring and more
frequent missions, many CPS outcomes have not yet been achieved. Furthermore, delays in project
implementation can be unexpectedly long and thus slow progress toward results. Targets should be more
reasonably attainable and more easily measurable to better reflect the realities on the ground.
V. ADJUSTMENTS TO THE COUNTRY PARTNERSHIP STRATEGY
38. In light of data limitations in Djibouti, it is proposed that the CPS period be extended by one
year, through FY18. This extension would allow the results of Djibouti’s next household income and
expenditure survey to be incorporated into the preparation of country plans and programs, including an
SCD in FY18 and the follow-on Country Partnership Framework.
39. Given the ongoing fragility and conflict in MENA, the WBG has prepared a new regional
strategy that puts the goal of promoting peace and social stability front and center. The strategy is
built around four pillars that address both the underlying causes of conflict and violence and their urgent
11
consequences though development interventions that foster inclusion and shared prosperity: (1) renewing
the social contract to generate a new development model that is built on greater citizen trust, more effective
protection of poor and vulnerable people, inclusive and accountable service delivery, and a stronger private
sector that can create jobs and opportunities for young people in the region; (2) regional cooperation,
particularly around regional public goods and sectors such as education, water, and energy, to foster greater
trust and collaboration across MENA countries; (3) resilience to refugee and migration shocks by
promoting the welfare of refugees, internally displaced persons, and host communities by focusing on
building trust and building their assets; and (4) reconstruction and recovery through a dynamic approach
that brings in external partners, leverages large-scale financing, and moves beyond humanitarian response
to longer-term development wherever and whenever conflict subsides.
40. Firmly grounded in the new MENA strategy, this PLR proposes several changes to the CPS
to strengthen its response to emerging challenges in Djibouti as laid out in Vision 2035. In line with
the second and third pillar of the MENA strategy, which focus on resilience and regional cooperation, the
new regional DRDIP operation seeks to improve access to social services, expand economic opportunities,
and enhance environmental sustainability for refugee host communities. In addition, new technical
assistance (TA) will support the Government of Djibouti in its initial steps toward universal health
coverage, an important goal in Vision 2035. This TA aligns with MENA strategy goals on renewing the
social contract and resilience.
41. The CPS is also being adjusted to strengthen support for service delivery, in response to
entrenched service delivery challenges in Djibouti and in line with the MENA strategy’s efforts to
renew the social contract between the government and its citizens. The PLR thus proposes to broaden
the focus of the second pillar of the CPS from “strengthening the business environment” to “strengthening
public and private sector capacity for service delivery.” This shift captures the need, as demonstrated across
the WBG’s portfolio in Djibouti, to address both public and private service delivery issues, with the aim of
providing services that better meet the needs of beneficiaries.
42. Stronger support for service delivery will help to buttress Djibouti’s work toward achieving
the SDGs by 2030. For example, expanded assistance for social protection initiatives will support SDG1,
target 3 on implementing a nationally appropriate social protection systems and measures for all. The
ongoing geothermal project supports SDG7 on ensuring access to affordable, reliable, sustainable, and
modern energy for all. Work on governance for private sector development contributes to SDG16, target 6
on developing effective, accountable, and transparent institutions at all levels. The WBG team stands ready
to assist Djibouti in developing individual country indicators to guide achievement of the global SDGs.
43. Drawing on the lessons outlined above, activities under the second pillar will approach the
need for improved service delivery and a stronger business-enabling environment through a more
explicit “governance” lens (see para 47). These efforts will be spearheaded by additional financing (AF)
for the Governance for Private Sector Development project. In addition, work on strengthening access to
energy will improve economic opportunities by facilitating the operation of SMEs.
44. Two new projects and three AF operations are expected to be delivered as part of the PLR.
In addition, two new grants will buttress efforts to reduce vulnerability and increase voice and participation
through improved parliamentary capacity and awareness raising on the effects of widespread consumption
of qat. IFC and MIGA will continue to explore opportunities to support the government in strengthening
the business environment and promoting the provision of good-quality services. Table 1 presents the current
and planned portfolio for lending as well as advisory services and analytics (ASA) under the CPS, and
12
proposed new operations and AF operations are described briefly below. Specific program activities for
FY18 are not yet defined, as the portfolio will depend on Djibouti’s allocation under IDA-18.
Table 1: Lending and ASA under the Djibouti CPS (Revised) Pillar 1: Reducing Vulnerability Pillar 2: Strengthening Public and Private Sector
Capacity for Service Delivery (Formerly
Strengthening the Business Environment)
Lending
IDA projects
approved
under CPS7
Project Amount
(US$ millions)
Project Amount
(US$ millions)
Second Urban Poverty Reduction Project (IDA, FY14)
Strengthening Institutional Capacity
and Management of the Education System Project (IDA, FY13)
5.6
6.0
Governance for Private Sector
Development Project (IDA, FY14)
Geothermal Power Production
(IDA, FY14)
2.0
6.0
Social Safety Net Project, AF (IDA, FY15)
5.0
Health Sector Performance
Improvement Project, (IDA, FY13)
7.0
Total 23.6 Total 8.0
Trust-funded
activities
approved
under CPS8
Access to Quality Education Project
(EFA-FTI, FY14, grant)
Health Sector Performance
Improvement Project (HRBF, FY15,
grant)
Enhancing Income Opportunities in
Djibouti (JSDF, FY15, grant)
3.8
7.0
2.73
Geothermal Power Production
(GEF, FY14)
Geothermal Power Production
(ESMAP, FY14)
6.0
1.1
Total 13.53 7.1
IDA pipeline
projects
under the
PLR9
Rural CDD and Water Mobilization AF (IDA, FY16)
7.0 Governance for Private Sector
Development AF (IDA, FY17)
5.0
Development Response to
Displacement Impacts in the Horn of
Africa (national/regional IDA, FY16)
2.0 national
18.0 regional
Sustainable Electrification (IDA,
FY17)
7.0
Social Safety Net Project, Second AF
(IDA, FY16)
4.0
Total 31.0 Total 12.0
ASA
Completed
under CPS
Poverty and Gender ESW (FY14) Light Manufacturing Policy Note (FY14) Poverty and Social Impact Analysis (FY15) Governance TA (FY15)
Active
Poverty TA (FY17) Rural Electrification Strategy (FY14)
Impact Evaluation of Social Safety Net (FY16) Universal Health Coverage TA (FY16)
TA on Audit, Procurement, and Fiduciary (FY15) Governance Capacity Building TA (FY16)
Tax Reforms TA (FY15) National Accounts TA (FY15)
Pipeline
TA support to design and implementation of the new
household budget survey (FY17) Training for government officials on integrity and anti-
corruption issues (FY16-17)
Systematic Country Diagnostic (FY18) Study on Competitiveness (FY17-18) Study on Service Delivery (FY17-18)
Study on Governance (FY17-18)
7 In IDA credits. 8 Recipient-executed trust funds in grants. 9 The pipeline for FY18 is not yet defined, as it will depend on Djibouti’s IDA-18 allocation.
13
45. The PLR’s proposed adjustments to the CPS program reflect the WBG’s commitment to
maintaining flexibility in a fluid environment and responding to government needs and priorities as
reflected in Vision 2035. The focus on these specific areas addresses the need to: (i) adapt to the evolving
situation on the ground (responding to the increase in the refugee population, to continued drought, and to
youth unemployment); (ii) deepen the WBG’s engagement in existing sectors (private sector development,
social safety nets, and rural development); (iii) build on past successful interventions (such as the Power
Access and Diversification Project); and (iv) strengthen support for the business-enabling environment by
pairing private sector reforms with greater public sector capacity to create space for, and support, those
reforms. The selectivity criteria used in deciding on new investments and ASA include alignment with
original CPS objectives and the new MENA strategy, government commitment, the WBG’s comparative
advantage among Djibouti’s development partners, and the history of WBG engagement in the sector.
Pillar One: Reducing Vulnerability
a. Development Response to Displacement Impacts in the Horn of Africa (regional project; US$2
million national IDA and US$18 million regional IDA). This project responds to the effects of
protracted refugee presence in the region and supports the MENA strategy’s efforts to strengthen
resilience and regional cooperation. This project will address the youth, climate change, and disaster
risk management agenda. Building on extensive analytical work undertaken in the region, the
DRDIP will seek to address gender inequality, reduce gender-based violence, and empower young
people by helping communities to identify and prioritize investments on social services, economic
infrastructure, and traditional and nontraditional livelihoods. Interventions will focus specifically on
women, female-headed households, and young people, who are disproportionately affected by
displacement. This work seeks to expand efforts to strengthen social cohesion and integration
between host communities and refugees and put in place mechanisms to prevent increased tensions.
In addition, the project will aim to improve health and reduce indoor air pollution through the use
of cleaner fuels and fuel-saving cooking technologies. Finally, the project will contribute to reducing
greenhouse gas emissions by supporting the use of renewable energy sources, soil and water
conservation measures, and afforestation efforts in support of the climate change agenda. The three
investment components are interrelated and mutually reinforcing. Implementation will be in a
phased manner, so as to mitigate the complexity of the project.
b. Additional financing for the Social Safety Net Project (US$4 million IDA). Building on the project’s
strong foundations in reducing vulnerability among Djibouti’s citizens, this AF will support the
efforts to renew the social contract by providing more effective protection for poor and vulnerable
people. It will continue to develop the building blocks of a social safety net system and to improve
the resilience of poor and vulnerable households with pregnant women and preschool children
through increased access to income, human capital development, and building of community assets.
One explicit objective will be to promote the institutionalization of the community-based approach
to preventing malnutrition, in collaboration with the Ministry of Health. The project will continue
to promote a national vision for social protection, including through continued support for the
creation and implementation of a social registry to allow the government to improve service delivery
and to consolidate and deliver multiple social assistance programs. The project will help strengthen
the design of a new national cash transfer program, in part by supporting coordination on
accompanying measures (on nutrition and education, for example) that build the human capital of
the poorest Djiboutians. This operation is designed to strengthen inclusive institutions that work
with poor people.
14
c. Additional financing for the Rural Community Development and Water Mobilization (PRODERMO)
(US$7 million IDA). In view of the tangible results recorded so far, the AF will build on the
momentum of the community-led participatory process and the management standards developed
by the existing project in order to consolidate achievements and scale up ongoing activities to six
additional grazing areas and two fishing sites. The AF will aim to: (i) mobilize surface and
groundwater for human consumption and for small-scale community agricultural and livestock
production activities to enhance rural households’ resilience to climate change, particularly
droughts; (ii) enhance the production and added value of rural communities’ agricultural and
livestock activities around water points; and (iii) strengthen organizational, technical, and
management capacity at the community level as well as the capacity of the implementing entity and
its central and regional staff. The AF will put greater emphasis on women’s representation in local
steering committees and as beneficiaries of subprojects and income-generating activities. It will
implement nutrition education and awareness- and capacity-building activities on the role of
livestock and fisheries as a source of nutrient-dense food. In line with the MENA region’s
commitment to engage with stakeholders more broadly, this AF will include citizen engagement to
strengthen the voice of poor people in Djibouti, which is essential for improved governance.
d. MENA MDTF grant (US$250,000) to support the National Assembly. The establishment of
Djibouti’s first two-party parliament since independence presents the country with an opportunity
to address issues of voice, accountability, and social cohesion, in an atmosphere where citizens are
more engaged in the political process and in their country’s development. This grant will support
the development of a national dialogue on key challenges and priorities, building on existing
momentum and promoting the MENA strategy’s efforts to renew the social contract with citizens.
The grant will also work to strengthen the capacity of parliamentarians in understanding their role,
preparing and reviewing laws, implementing the budget, and performing their oversight function
while contributing to an open and collaborative process. All proposed activities would include
representatives from all major parties.
e. MENA MDTF grant (US$363,000) to reduce qat consumption among youth. Qat is a national
cultural institution, deeply entrenched in all areas of life in Djibouti. Considerable time and resources
are devoted to chewing qat, not only among adult males of all social classes, but increasingly among
youth and women. Qat consumption diverts limited money from spending on basic needs, takes time
away from family, adversely affects opportunities to improve well-being and seek employment, and
reduces work productivity. Moreover, qat has several negative health effects, such as hyperactivity,
insomnia, mild depression and irritability at withdrawal, and increased likelihood of heart attacks,
oral cancers, and decreased liver function over the long term. The grant works to raise awareness of
the impacts of qat through informational, educational, and communication activities; to build the
capacity of young women and men through vocational and life skills training; and to facilitate job
placements.
Pillar Two: Strengthening Public and Private Sector Capacity for Service Delivery
f. Sustainable Electrification (US$7 million IDA). This project will aim to improve the delivery of
modern electricity services through on- and off-grid investments, thus strengthening the private
sector’s ability to provide services and economic opportunities. The project will build on the success
of the Power Access and Diversification Project, which electrified over 26,000 homes (covering 4
percent of the population) in Ballbala. The project will seek to attract both private and public funds
15
to help extend the existing grid in peri-urban areas and scale up pilot projects of solar photovoltaic
systems in rural areas. The WBG will seek cofinancing from donor partners and will draw on best
practices from its extensive experience in implementing energy access projects around the world.
g. Additional financing for the Governance for Private Sector Development Project (US$5 million
IDA). The ongoing project focuses on institutional capacity building and investment climate reform,
which will strengthen overall governance. Given the low level of technical and managerial capacity
and limited access to finance among new firms and entrepreneurs, however, AF will be provided to
help micro, small, and medium enterprises make the investments they need to become more
competitive, buttressing the new MENA strategy’s efforts to renew the social contract by supporting
a stronger private sector that can create jobs and opportunities for young people. The project will
expand the scope and scale of TA to help regulatory institutions develop a coherent action plan for
alleviating burdensome procedures. The AF will also support investments to upgrade the central
bank’s core payment infrastructure and to establish a partial credit guarantee fund. The AF will
benefit from continued collaboration between Global Practices in Finance and Markets, Trade and
Competitiveness, and Governance. Trust fund resources would be raised from the Financial Sector
Reform and Strengthening Initiative (FIRST) to sustain financial infrastructure and access to finance
reform efforts by the Ministry of Finance and the Central Bank of Djibouti.
h. IFC will continue to focus on proactive business development for potential investments in sectors
important for economic diversification (such as fisheries, tourism, financial services, and
infrastructure, including energy) and on noninvestment activities such as SME development and the
investment climate. New intervention areas would include: (i) introduction of capacity building tools
for SMEs (using Business Edge/SME Toolkit); (ii) provision of relevant technical knowledge and
support to the Central Bank of Djibouti to develop a robust legal and/or regulatory framework for
leasing activities; and (iii) support for the government (together with the Bank and the AFD) on
developing a PPP strategy and institutional framework, while identifying in parallel a pipeline of
feasible priority PPP projects. Support for PPPs will help the government strengthen private sector
participation in developing targeted infrastructure projects, thereby enabling the government to
deliver sustainable, resilient infrastructure that supports long-term economic growth and equitable
access to basic services.
i. MIGA will remain open to supporting cross-border private investments in Djibouti in projects that
align with country priorities, as articulated in the CPS and the MENA and MIGA strategies. To
date, MIGA has supported one project in Djibouti, the Doraleh Container Terminal Port, with an
outstanding gross exposure of US$81 million. MIGA’s political risk insurance guarantees will be
available for projects in sectors such as infrastructure, power, transportation, finance,
manufacturing, and agriculture, with an emphasis on job creation. MIGA will work with IFC to
identify projects in which political risk guarantees can support the decision to channel private sector
investment into Djibouti. MIGA will continue to offer long-tenor coverage (of up to 20 years) and
capacity to support large transactions.
46. In furtherance of the WBG’s efforts to strengthen internal collaboration, this PLR is being
presented to the Board together with three new, complementary projects: DRDIP, AF for SSNP, and
AF for PRODERMO. Under the regional DRDIP, currently underserved people in target communities
will be supported through service delivery subprojects based on inclusive and conflict-sensitive community
mobilization and a careful mapping of existing service delivery locations and underserved areas. While
willingness to participate will be an important criterion, the DRDIP can usefully benefit from the social
16
registry being developed with support from the SSNP. At the same time, SSNP beneficiaries could be
prioritized for support in taking up traditional and nontraditional livelihood activities under the DRDIP,
provided they meet the eligibility criteria. Similarly, the SSNP and PRODERMO initiatives will work
together to ensure that community-based prevention activities addressing maternal and child health and
nutrition will be extended in rural areas. The strong community structures put in place through
PRODERMO will be leveraged to train community leaders and to put in place prevention activities through
the SSNP. Moreover, PRODERMO’s efforts to increase access to water among rural communities and to
enhance their capacity to manage water and agro-pastoral resources using a participatory approach to
community-based development will be furthered by DRDIP’s investments in traditional and nontraditional
livelihoods to diversify income sources, enhance productivity and returns through value chain investments,
and support livelihood-based community organizations to ensure the sustainability of project outcomes.
47. Cutting across both pillars of the CPS are a number of initiatives in governance. First,
promising new engagements with parliament and local justice institutions are being rolled out to
complement the WBG’s significant existing menu of governance work, including Technical Assistance to
support reforms in the civil administration, state-owned enterprises (SOEs), supreme audit institutions, and
the justice sector, some of which have had measurable impact. TA (since FY15) on enhanced transparency
and accountability of SOEs has led to the development of a draft SOE corporate governance law that is now
awaiting parliamentary approval after passing the Council of Ministers. Furthermore, a recent stocktaking
highlighted additional critical areas in which the WBG could consider providing support during the coming
years, including in open governance and anti-corruption, public financial management, sector governance,
and citizen engagement, many of which would offer strong complementarities with existing engagements
across the two pillars. Training and support will continue to be provided, in coordination with the IMF, on
debt management. Second, two new studies are being commissioned—one on strengthening Djibouti’s
competitiveness and one on improving service delivery—to offer recommendations on governance reforms
needed to ensure equitable access to opportunities, based on a thorough assessment of the country’s
governance shortcomings and the tribal and family considerations that prevent citizens from having equal
opportunities and participating fully in economic life. The studies will identify actionable measures to
renew the social contract between the state and its citizens, for incorporation into existing and future
programs. Third, the WBG will continue to provide assistance in strengthening Djibouti’s national accounts
during the remainder of the CPS period. Fourth, TA to support the design and implementation of the new
household budget survey planned for 2017 will make available better-quality data to inform policy making
and will be supplemented by training for government officials on integrity and anti-corruption issues.
Finally, an SCD is planned for FY18 to inform the next Country Partnership Framework.
48. ASA will continue to inform Bank-financed operations, leverage policy change, and help
influence other partner’s choices. The Rural Electrification Strategy (FY14) will inform the new
Sustainable Electrification project. Bank work resulted in new legislation to reform the management of
SOEs. Ongoing Poverty TA will support the design and focus of operations in health, education, and rural
and urban development. Finally, support to the design and implementation of the new household budget
survey will inform all ongoing and future operations, including serving as a basis for the SCD. Based on
the findings of the SCD and in the context of the annual WBG-IMF debt sustainability analysis, the ASA
program laid out in the CPF and the PLR could support debt and public investment management as well as
public financial management.
49. The CPS results framework has been adjusted to reflect the proposed revision of the second
pillar, and to align specific outcomes more closely with Bank interventions (Annex 2). The original
17
CPS results framework did not include milestones along the path to achievement of CPS outcomes. This
PLR has introduced milestones, allowing for better differentiation between outcomes to be achieved and
the intermediate steps to be completed along the way. Indicators on the distribution of beneficiary cards
through the social registry, access to surfaced roads in Quartier 7, and independent review and certification
of geothermal well test results have been revised to align more closely with indicators being monitored
under ongoing interventions. Furthermore, as indicated above, the original CPS indicator associated with
the reform of the telecommunications sector has been removed. The Bank stands ready to reopen the
dialogue on a proposed opening up of the telecommunications sector, should the authorities decide to
undertake the necessary reforms. The updated results matrix includes 16 outcomes and additional
milestones. Of these outcomes, seven have been achieved to date. While results achieved during the CPS
period are expected to come primarily from the ongoing portfolio, selected indicators of progress have been
added to reflect new activities. These indicators have been specified with due regard for the limited progress
that will be made in these interventions between now and the end of the CPS period. More substantive
results from these programs will be captured in the results matrix for the Country Partnership Framework
to follow this CPS period.
VI. RISKS TO THE CPS PROGRAM
50. The CPS identified a number of country-level and program-specific risks to satisfactory
program implementation. The country-level risks included vulnerability to natural disasters and external
shocks, relatively low budgetary and institutional capacity, potential for elite capture and patronage,
enduring social tensions and the risk of social instability, and regional security challenges. The program-
level risks included governance challenges, the slow pace of behavioral change, capacity constraints, and
Country Program Phase III (BE) GFDRR 02/28/2014 02/27/2014 6/30/2016 10/31/2016 0.80 0.75 0.05
Total 24.5 3.20 21.28
Plain ofP lain ofGobaadGobaad
PlateauPlateauof Dakkaof Dakka
Plain ofP lain ofHanleHanle
Plain ofP lain ofGagadeGagade
GRANDGRAND BARABARA
BARABARAPETITPETIT
DaddatoDaddato
RandaRanda
ArtaArta
MoulouaMouloua
As ElaAs ElaModahtouModahtou
GalafiGalafi
LoyadaLoyada
Hol HolHol Hol
Ali AddaAli Adda
AmbadoAmbado
ChEbelleyChEbelley
DayDay
MalahMalah
DikhilDikhil 'Ali Sabieh'Ali Sabieh
GoubettoGoubetto
DamerjogDamerjog
O B O C KO B O C K
' A L I' A L IS A B I E HS A B I E H
A R T AA R T A
D J I B O U T ID J I B O U T I
T A D J O U R A HT A D J O U R A H
D I K H I LD I K H I L
Daddato
Randa
Arta
Mouloua
Yoboki
As ElaModahtou
Galafi
Loyada
Hol Hol
Ali Adda
Ambado
ChebelleyDamerjog
Goubetto
Sagallou
Day
Malah
Dorra
Khôr ‘Angar
Obock
Dikhil
Tadjourah
'Ali Sabieh
DJIBOUTI
O B O C K
' A L IS A B I E H
A R T A
D J I B O U T I
T A D J O U R A H
D I K H I L
SOMALIA
ETHIOPIA
ERITREAREP. OFYEMEN
Sartai
Balli
Doubie
Gobaad
Cheiketi
Beyade
Hol Hol
Ambouli
G u l f o f A d e n
LakeAbbé
LakeAssal
Gulf of Tadjourah
To Assab
To Bati
To Berbera
To Dira Dawa
P lain ofGobaad
Plateauof Dakka
Plain ofHanle
Plain ofGagade
GRAND BARA
BARAPETIT
1783 m
42°E 43°E
42°E 43°E
12°N
11°N
12°N
11°N
DJIBOUTI
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.